Automation and the case for government intervention

The robots are coming to take your job - or maybe not quite yet.

As the recent ScotGov/ STUC paper puts it, there are two schools of thought. Those who believe we stand on the cusp of widespread technological unemployment to those who believe the labour market will prove, as it has in the past, much more resilient. It may simply be my age, but I tend to fall into the latter category.

I can recall futurologists telling us that we would all have portfolio careers, yet in practice the amount of time we work for the same employer has actually increased. Yes, automation has resulted in fewer jobs in some sectors, but it has created new ones that we would never have thought of twenty years ago. 

I was pleased to read that my ageing instinct is supported by Danish academic robotic experts who argue that there is still a long way to go before robots will be able to match a number of fundamental human skills. They give five reasons why robots aren’t about to take over the world. These include the abilities of the human hand and manipulation that robots are nowhere to replicating. Humans also have tactile perception through sensors in our magnificent skin. Finally, robots haven't got the human interaction and reasoning skills of humans.

So, robots are a reality today in industry and they will appear in public spaces in more complex shapes. But in the next two decades, robots will not be human-like, even if they might look like humans. Instead they will remain sophisticated machines.

That doesn't mean that we shouldn't plan for the future. At the start of my career as a trade union official, we were busy negotiating 'new technology agreements'. They addressed the direct workforce implications of computerisation, but didn't always tackle the workforce planning and wider economic and social policy implications of automation.

As I said in Monday's Herald feature on the ARI report: "Proper planning and strategy is needed now, not further down the line. We should be anticipating where we are likely to see job losses and putting measures in place to ensure that we have a just transition to new types of jobs.  Industry will not do this, it's very hard to get companies to plan that far in advance, so government needs to step up to the plate."

The ARI report revealed the UK is lagging behind other countries when it comes to preparing for the changes - with education and training the main areas of concern. It lists the UK as number 8 in the world in preparing for the expected rise in robots. Education and training in schools and the workplace is a key concern. The report found that UK primary schools have not focused enough on developing critical thinking and problem solving skills.

That brings me back to the ScotGov/STUC report. It gives us a very balanced view of the evidence, without coming down on one side or the other. However, they highlight that researchers on both sides of the future of jobs debate share concerns over the potential distributional consequences of technological change. The OECD finds that; “low qualified workers are likely to bear the brunt of the adjustment costs... the likely challenge for the future lies in coping with rising inequality". There are also significant regional differences. For example, the OECD report says 33% of jobs in Slovakia are at risk, compared to only 6% in Norway.

The report points to labour market trends in Scotland, few of which have been driven by technology. The Scottish Government points to their labour market strategy and the Fair Work Convention. As well as their support for new industries and the planned Just Transition Commission.

These are all worthwhile initiatives, although they are often stronger on process than delivery. If we are to seriously address the challenges of automation it requires a radical industrial strategy coupled with much stronger Fair Work measures. We need to be more like Norway than Slovakia, otherwise automation will have significant job consequences and create an even more unequal society.

Better pensions coverage wont be sustained unless we sort out the pensions system

The big increase in private pension coverage is very welcome, but we need to improve the adequacy of pensions and the quality of provision as well.

The impact of auto-enrolment on pension coverage has been very significant. As the Resolution Foundation chart below shows, overall workplace pension coverage has jumped from 46.5% in 2012 to 72.9% in 2017. 

This chart also shows that the proportion of employees holding defined benefit pensions has continued its longer-term decline. However, this form of quality provision still covers almost 30% of the workplace. I know from my own experience as Joint Secretary of the SLGPS, the largest pension fund in Scotland, that auto-enrolment has also increased coverage, particularly among lower paid, mostly women workers.

While the growth in pension coverage is very welcome, contribution rates are often low. The initial default minimum contribution rates was only 2% of qualifying earnings. More than half of all private sector employees with a workplace pension contributed less than 2%. The minimum contribution is now 5% (with at least 2% from the employer). This will rise to 8% next April (with at least 3% from the employer). it remains to be seen, at a time when real wages are still falling, if these increases result in higher levels of opting out, particularly amongst low paid workers. 

The growth in coverage is largely in defined contribution schemes. This type of scheme places the investment risk on the workers who are least able to sustain it. If pension coverage and adequacy is to be sustained we need to defend and grow high quality defined benefit schemes and collective defined contribution schemes that share the risks.

A recent report by MPs on the Work and Pensions Committee highlighted market failure in relation to so called pension freedoms. The committee called for the government to rethink its decision not to allow state-backed provider NEST to offer retirement products. As they say, "Concerns that allowing NEST to offer such products would hinder competition in the market would carry greater weight were there evidence of a functioning market currently."

We also need to tackle the lack of transparency over the fees charged by investment managers. This is something UNISON has campaigned on for several years - a cause that has now been taken up by the Financial Conduct Authority. Their study found that fund managers were overcharging clients for hundreds of billions of pounds worth of investments. They enjoy huge profits and salaries, but performance is frequently mediocre. If low paid workers are to be encouraged to hand over their hard earned wages in higher pension contributions, then every possible penny needs to go into their pension pots, not the pockets of fat cats, who are currently ripping them off.

Finally, we also need to ensure that our pension funds are invested wisely and help to grow the real economy and create jobs. For example, investment in fossil fuels is not only risky as the world wakes up to the threat of climate change, but they don't create jobs either as the chart below shows.

So, let's celebrate the increase in pension coverage, but at the same time recognise that we have to put our pensions system in order. We also need to improve real wages and the adequacy of incomes in retirement, if that coverage is to be sustained.